Fairfax’s pain just beginning as Unaoil stories keep taking

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After apologising and paying a significant but undisclosed sum for publishing false allegations about businessman Wal King, optimists at Fairfax Media might be hoping the worst was over.

The publisher’s pain, however, is only just beginning. The cost of settling with Mr King, the former chief executive of Leighton Holdings, is merely the most visible part of a wave of litigation over Fairfax stories about corruption and the international oil industry.

Fairfax has quietly offered $50,000 and an apology to another businessman, Tony Kazal, who sued after being portrayed on April 2 last year as the “Sydney connection” of an international “bribe factory”.

Within weeks, the publisher will be confronted with yet another legal action, this time from the company at the centre of the allegations that triggered these backdowns. That company is ­Unaoil, a Monaco-based business that is a player in the internat­ional oil industry and is owned by the Ashani family. It featured in the 2013 article that led to the payout to Mr King, and also featured in last year’s allegations about a “Sydney connection”.

Solicitor Rebekah Giles, a partner at law firm Kennedys, has been instructed by Unaoil to file proceedings against Fairfax ­seeking an order for preliminary discovery. That means Fairfax is about to face a determined effort to unmask the confidential ­sources who gave reporters Nick McKenzie and Richard Baker the documents that formed the basis for the articles about Unaoil and kickbacks. Ms Giles says her ­clients will argue that the documents were stolen and the proposed legal action is aimed at identifying the thief. This could cause an ethical quandary at Fairfax. Journalists are required by their code of ethics to protect the confidentiality of sources. But if Fairfax does so in this case, what sort of source will the publisher be protecting?

 

In May last year, Hedley Thomas reported in The Aust­ralian on a development that shed fresh light on the Unaoil stories. An extortionist had obtained hacked emails from Unaoil. In the months before Fairfax launched its series, the extortionist threatened to release those documents to the media unless the Ashani family paid $5 million. Saman Ashani told Thomas: “The extortionists themselves said that they would leak to news organisations including in Australia. The emails that the Fairfax group received are from the same batch of archived emails that were stolen.”

In the wake of Fairfax’s blockbuster series on Unaoil, the release by the oil company of the threatening emails it was sent by an extortionist demanding millions of dollars raised a terrible risk for Baker and McKenzie and their lawyers — that their own shadowy source was a criminal blackmailer whom Unaoil had refused to pay off. There is no suggestion that Fairfax or any of those involved in preparing the Unaoil stories knew at the time about this development.

In the same month that Thomas’s article appeared, Mr Kazal filed his statement of claim. He sued over a post on The Sydney Morning Herald’s Facebook page, not the associated article that appeared in the print edition.

Fairfax quickly realised it had a problem. On May 25 it took down the “Sydney connection” item from its Facebook page and on August 2 offered Mr Kazal $50,000 and a public withdrawal of the suggestion he paid bribes.

Fairfax, through its lawyers Banki Haddock Fiora, offered to say that readers might have interpreted the item on Facebook as “suggesting Mr Kazal was complicit in paying bribes. This was never intended and if anyone read the item in that way, the suggestion is unequivocally withdrawn, and we apology (sic) to Mr Kazal for any harm he has suffered as a result.”

 

This offer was rebuffed as inadequate, but provides a clue about the possible size of the payout to Mr King. Mr Kazal had sued over material that appeared on a Facebook page that was seen — according to Fairfax’s defence — by a small fraction of The Sydney Morning Herald’s Facebook followers. The 2013 article that led to the payout to Mr King was published in The Sydney Morning Herald, The Age and The Aust­ralian Financial Review.

The failed attempt in August to smooth things over with Mr Kazal came four months after he was involved in a frank exchange of emails with Baker, who with McKenzie, helped prepare last year’s Unaoil coverage.

This is the same reporting team that wrote the 2013 article falsely linking Mr King to Unaoil and kickbacks which culminated in the payout and apology.

It was during that exchange that Baker — co-author of “the Sydney connection” story — told Mr Kazal he believed he was one of Unaoil’s victims.

On Saturday, April 2, Mr Kazal complained at length to Baker about what he believed were shortcomings in the Unaoil articles. Baker wrote back: “Tony, you had your chance to have input before the article. You chose not to engage. Why whinge after the fact?”

Baker wrote that he was happy to hear Mr Kazal’s side of the story and added: “PS article never said you bribed anyone. If anything Tony it looked to me like you got ripped off by Unaoil.”

Early on Sunday, April 3, Mr Kazal emailed Baker: “You claimed in your email to me yesterday that you didn’t say I was corrupt and you felt I was a victim of Unaoil ripping me off.

“So why then did you write a three-part series about corruption in the global oil industry with the third and most crucial article concluding the series being all about me as the Sydney connection allegedly supporting the corrupt family running Unaoil, showing my photo, company details etc — especially given the only reference to my involvement was about a 2006 contract I had with the company?” Mr Kazal wrote.

At 3.24am on Sunday, April 3, Baker replied: “Tony, I am under no obligation to respond to your questions and have no intention of doing so. Regards, Richard.”

At 5.30am Mr Kazal wrote back: “If you think for a second we will not pursue you legally then you are seriously misguided.”

 

CHRIS MERRITT/ The Australian

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